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Cablegate: Mfa Signals Approval On Reactor Fuel Conversion Proposal,

VZCZCXRO1475
PP RUEHHM
DE RUEHHI #2817/01 3110644
ZNR UUUUU ZZH
P 070644Z NOV 06
FM AMEMBASSY HANOI
TO RUEHC/SECSTATE WASHDC PRIORITY 3929
INFO RHEHNSC/NATIONAL SECURITY COUNCIL WASHINGTON DC PRIORITY
RHMFIUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEHHM/AMCONSUL HO CHI MINH 2106
RUEAIIA/CIA WASHINGTON DC

UNCLAS SECTION 01 OF 04 HANOI 002817

SIPDIS

STATE FOR NP (FENSTERMACHER); EAP/MLS
NSC FOR HOLLY MORROW
USDOE FOR NNSA/NA-1 (BROOKS); NNSA/NA-20 (TOBEY, BAKER);
NNSA/NA-21 (BIENIAWSKI, CUMMINS, DICKERSON)

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG TRGY KIPR KNNP KGIT VM
SUBJECT: MFA SIGNALS APPROVAL ON REACTOR FUEL CONVERSION PROPOSAL,
BUT NO CONFIRMATION YET

THIS CABLE IS SENSITIVE BUT UNCLASSIFIED.

Ref: Hanoi 2734

1. (SBU) Summary. On October 26, 2006, Department of Energy's
National Nuclear Security Administration (NNSA) staff and ESTHOff
discussed with Ministry of Foreign Affairs (MFA) staff details of
NNSA Assistant Deputy Administrator (ADA) Andrew Bieniawski's letter
to Assistant Minister of Foreign Affairs Phan Binh Minh, which was
delivered to MFA on October 25. ADA Bieniawski's letter summarizes
the USG's proposal to the Government of Vietnam (GVN) to swap-out
high-enriched uranium (HEU) fuel in the Dalat reactor, convert the
reactor to low-enriched uranium (LEU) fuel and return Russian-origin
spent HEU back to Russia. During the meeting, MFA Acting Director
of International Organizations Le Hoai Trung stated that the MFA
attaches "great importance" to the issue and is "committed" to
recommending that the Ministry of Science and Technology (MOST)
approve the USG proposal, "sooner rather than later." In a
follow-up discussion on November 2, MFA Americas Department Deputy
Director Le Chi Dung indicated to ESTHOff that MFA and MOST are now
on the same page, that an approval letter from the Office of the
Prime Minister may come as soon as early next week and that "it is
almost a done deal." Comment: Until we receive a written response
from MFA to ADA Bieniawski's letter, we cannot be sure that the
strong, positive language expressed by these MFA senior officials
signals a breakthrough on the issue. End summary.

ADA Bieniawski's Meeting with MFA on the Reactor Conversion
--------------------------------------------- ---

2. (SBU) As previously reported (reftel), the Department of
Energy's National Nuclear Security Administration Assistant Deputy
Administrator Andrew Bieniawski met Assistant Minister of Foreign
Affairs Pham Binh Minh on October 24, 2006, to continue engagement
with the GVN regarding the fuel conversion of Vietnam's research
reactor and to reiterate at higher levels within the GVN the
importance of showing a tangible commitment on this issue prior to
President Bush's visit in November. In that meeting, ADA Bieniawski
offered to provide MFA with a letter containing specific details of
the proposed USG assistance under the Russian Research Reactor Fuel
Return (RRRFR) program to the GVN. The letter was transmitted to
MFA by facsimile on October 25. Text of letter follows.

ADA Bieniawski's Letter to MFA Assistant Minister Minh
--------------------------------------------- ---------

3. (SBU) Begin Text.

October 25, 2006

Mr. Pham Binh Minh
Assistant Minister
Ministry of Foreign Affairs
1 Ton That Dam
Hanoi, Vietnam

Dear Assistant Minister Minh:

I would like to take this opportunity to thank you for your
government's continuing commitment to nuclear nonproliferation which
has contributed greatly to the security of our countries and the
world community. The purpose of this letter is to clearly summarize
the status of several proposed nonproliferation projects and to
specify the benefits of these programs to the Government of
Vietnam.

Return of Russian-origin fresh highly enriched uranium (HEU):

First, we would like to receive final approval from the Prime
Minister's office to repatriate Russian-origin fresh HEU fuel that
is currently in storage at the Dalat Research reactor. Currently,
there are 36 assemblies at the Dalat Research reactor containing 4.3
kilograms of highly enriched uranium. Our proposal is to return
this Russian-origin fresh HEU fuel as part of the very successful
Russian Research Reactor Fuel Return program. This program is under
the framework of the International Atomic Energy Agency and numerous
countries are participating under this program to repatriate
Russian-origin fresh and spent fuel to Russia. To date, we have
safely and successfully conducted ten shipments from eight countries
(Yugoslavia, Romania, Bulgaria, Libya, Uzbekistan, the Czech
Republic, Latvia, and Poland) to repatriate their Russian-origin
fresh HEU fuel. The only countries that have Russian-origin fresh
HEU fuel that have not yet agreed to participate are Belarus, DPRK,

HANOI 00002817 002 OF 004


Ukraine, and Vietnam. We are in discussions with Belarus and
Ukraine to return their Russian-origin fresh HEU fuel and expect to
reach agreement soon with them. Thus, we very much would like
Vietnam to be a participant in this program.

It is also important to note that since the fresh HEU fuel shipment
is conducted under the auspices of the IAEA, no
government-to-government agreement is required to move forward with
the shipment. As has been done with numerous other countries, a
contract would be signed between the IAEA, the Russian
transportation company Sosny, and the relevant nuclear agency in
each country (in the case of Vietnam this would be with VAEC).

Our compensation package is the following:

First, the U.S. Department of Energy will cover all costs associated
with packaging, licensing, and transportation of the fresh HEU fuel
to Russia. Specifically, through an IAEA contract, the Russian
Federation will be paid approximately $550,000 and VAEC will be paid
approximately $50,000. The $50,000 will cover Vietnamese costs for
preparation, packaging, and transportation of the fresh HEU fuel to
the airport.

Second, in exchange for Vietnam agreeing to return the 36 fresh HEU
assemblies, the U.S. Government will provide full compensation to
Vietnam for the value of this material. As noted above, the 36
assemblies of Russian-origin fresh HEU fuel contain 4.3 kilograms of
HEU, which is 1.45 kilograms of U-235. Normally, our standard
compensation package is equivalent replacement based on U-235 (1
gram of U-235 of HEU should be replaced by 1 gram of U-235 of LEU).
Thus, the package should be 1.45 kilograms of U-235 of LEU, totaling
33 assemblies. However, I have authorized that the compensation
package be increased so Vietnam will receive compensation totaling
1.8 kilograms of U-235 (not just 1.45 kilograms of U-235) which is
equal to 36 assemblies of LEU. This increased quantity of LEU will
ensure that the Dalat research reactor will operate for an
additional 4 years. Originally, with an HEU core, the reactor would
operate for 10.5 years. With the new 36 LEU replacement assemblies,
the reactor can now operate for 14.1 years.

Also, in our meeting with you on October 24, 2006, you asked me to
consider additional projects that could be conducted that would be
beneficial to Vietnam. I have given this careful consideration and
I am willing to authorize an additional $500,000 over a two-year
period to conduct joint scientific research at the Dalat research
reactor. This would be new funding through an IAEA contract with
VAEC.

Thus, we are waiting your final decision to move forward with the
return of Russian-origin fresh HEU fuel. As you can see, this would
be beneficial to the Government of Vietnam and ensure that Vietnam
is joining the rest of the international community in returning this
fuel. As I discussed with representatives from the White House, we
would like this decision to be included in the proposed Joint
Statement in November as a concrete example of U.S. and Vietnamese
expanded cooperation on nuclear nonproliferation.

Conversion of the Dalat Research Reactor from HEU to LEU:

Second, we would also like to receive final approval from the Prime
Minister's office to move forward with conversion of the Dalat
Research Reactor. As I mentioned to you in our meeting, conversion
of research reactors from the use of HEU to LEU is highly encouraged
by the IAEA and its Members States. There are 106 research reactors
around the world that can currently convert from the use of HEU to
LEU. This is part of the IAEA's global effort to minimize the use
of highly enriched uranium in civilian nuclear applications around
the world while at the same time ensuring that research reactors
continue to operate on low enriched uranium. To date, 46 out of the
106 research reactors have already converted to LEU fuel. This
include 13 research reactors in the United States, 2 research
reactors in Libya, and research reactors located in the Czech
Republic, Pakistan, Iran, Taiwan, and Turkey to name a few
countries. Discussions are underway with many other countries to
convert the full 106 research reactors from the use of HEU to LEU.

As noted above, we have developed a generous compensation package
for Vietnam to provide 36 assemblies of replacement LEU fuel that
would be used to begin conversion of the Dalat research reactor. We
have prepared a draft contract that would be signed between VAEC,
the Russian Fuel Fabricator TVEL, and DOE. This contract has a
value of approximately $1.1 million which is the cost to pay the
Russians to fabricate and deliver the replacement LEU fuel. Thus,

HANOI 00002817 003 OF 004


by agreeing to convert, Vietnam is in essence receiving LEU fuel
worth over $1 million. It is also important to note that no
government-to-government agreement is required to move forward with
this project.

Under this proposed approach, we would ensure the timely supply of
LEU fuel to the Dalat Research Reactor and the uninterrupted
operation of the Dalat Research Reactor. Also, we have conducted
extensive technical studies with your experts to ensure the safe
operation of the Dalat Research Reactor using LEU. Several
technical experts from the Dalat Research Reactor visited the
Argonne National Laboratory in 2005 to work on research reactor
conversion calculations. Based on the results of these
calculations, which were presented to the Ministry of Science and
Technology in December last year, your technical experts have
confirmed that there are no technical issues remaining that need to
be addressed. Thus, we are waiting your final decision to move
forward with the conversion of the Dalat Research Reactor from the
use of HEU to LEU fuel. As you can see, this would be beneficial to
the Government of Vietnam and ensure that Vietnam is joining the
rest of the international community in converting its research
reactor. As I discussed with representatives from the White House,
we would like this decision to be included in the proposed Joint
Statement in November as a concrete example of U.S. and Vietnamese
expanded cooperation on nuclear nonproliferation.

Return of Russian-origin spent highly enriched uranium (HEU):

We also would like to reach agreement with the Government of Vietnam
to repatriate the Russian-origin spent HEU fuel to Russia. There
are 104 spent HEU fuel assemblies that are currently in the core of
the Dalat research reactor that are eligible to be returned to
Russia. In order to complete the spent fuel shipment, the U.S. and
Vietnam will need to conclude an appropriate
Government-to-Government Agreement. As you know, in December 2004,
and again in April 2006, the U.S. tabled a proposed agreement for a
broad range of nonproliferation assistance, together with an
Implementing Agreement between DOE and MOST for bilateral fuel
return cooperation. We recently received your diplomatic note #424
and therefore we do not expect to reach agreement on this issue
before the Presidential visit. However, conclusion of a
Government-to-Government Agreement is required in order to enable
the U.S. to provide assistance with the proposed spent fuel
shipment. We are willing to pursue either the currently proposed
Nonproliferation Assistance Agreement or alternatively an Agreement
limited to the spent fuel return.

In conclusion, I would to thank you once again for a very productive
meeting on October 24, 2006. As is noted above, we are waiting for
final approval from the Prime Minister's office to move forward with
both repatriation of the Russian-origin fresh HEU fuel and
conversion of the Dalat Research Reactor from the use of HEU to LEU
fuel. I hope this letter will facilitate this decision so both of
these items can be included as part of the Presidential Joint
Statement in November.

Sincerely,

(signed)

Andrew Bieniawski
Deputy Assistant Secretary for Global Threat Reduction
National Nuclear Security Administration
U.S. Department of Energy

cc: Dr. Le Dinh Tien, Vice-Minister, MOST
Dr. Vuong Huu Tan, Chairman, VAEC
Dr. Nguyen Nhi Dien, Director, DNRR
Mr. Le Hoai Trung, Acting Director, Department of International
Organizations, Ministry of Foreign Affairs

End text.

Follow-up Discussions with MFA
------------------------------

4. (SBU) On October 26, 2006, NNSA staff and ESTHOff met with MFA
International Organizations Department Acting Director Le Hoai Trung
to discuss details of ADA Bieniawski's letter, which was delivered
to MFA on October 25. Mr. Trung stated that the MFA attaches "great
importance" to the issue and is "committed" to recommending that
MOST approve the USG proposal, "sooner rather than later." More
specifically, Mr. Trung indicated that a senior MFA official would

HANOI 00002817 004 OF 004


send ADA Bieniawski's letter to MOST, copying the Office of the
Prime Minister and recommending that MOST move forward on the
proposal without delay.

5. (SBU) Mr. Trung asked specific, detailed questions about the
"mixed core" conversion and the tripartite framework under the IAEC
contract, both of which were answered by the NNSA team with
precision. Mr. Trung requested that any future contractual
arrangement to return spent Russian-origin fuel be done by "the
simplest type of agreement." NNSA legal counsel noted that any
future agreement on spent fuels needs to be
government-to-government, due to liability issues. Counsel
explained that such an agreement could be conducted through an
exchange of diplomatic notes. This would be done in lieu of signing
a broad bilateral agreement, which the GVN has no interest in
pursuing at this time.

6. (SBU) On November 2, 2006, MFA's Americas Department Deputy
Director Le Chi Dung indicated to ESTHOff that MFA and MOST are now
on the same page, that an approval letter from the Office of the
Prime Minister may come as soon as early next week and that "it is
almost a done deal." Mr. Dung was aware that the topic would be
discussed in a meeting between Ambassador Marine and Office of the
Government Vice Chairman Nguyen Xuan Phuc (septel).

COMMENT
-------

7. (SBU) While Post awaits a written response from MFA to ADA
Bieniawski's letter, the strong, positive language expressed by MFA
senior officials signals a possible breakthrough on the issue and
renewed hope that the GVN will deliver on Dalat prior to the
President's visit. MFA is aware that few days remain to deliver on
several major issues, which include the Dalat conversion, and it
remains to be seen whether inherent bureaucratic processes can be
overcome given that the GVN's top leadership thoroughly consumed
with preparations for Hanoi's upcoming APEC leaders' summit.

MARINE

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